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Divorce, Executive Style

September 17, 1995

News: Analysis & Commentary: EXECUTIVE SUITE

DIVORCE, EXECUTIVE STYLE

No matter who you believe, it has been a pretty messy divorce. The estranged husband claims his wife was stolen by her onetime boss, the former chief executive of Thrifty PayLess Inc., the nation's second-largest retail drugstore chain. The wife says that's bunk and claims her soon-to-be-ex is trying to punish her for leaving him.

The nasty affair surfaced when the husband, David Nelson, 36, filed a lawsuit on Aug. 15 alleging that former Thrifty PayLess CEO Timothy R. McAlear hired Nelson's wife as marketing vice-president at nearly six times her previous salary to continue a "secret romantic and sexual relationship" with her. Nelson is suing McAlear and Thrifty PayLess for allegedly inducing him to leave a better-paying job and follow his wife to Oregon.

NO PAIN. Both McAlear, 51, and Lori Young Nelson, 32, were ousted from their jobs by Thrifty PayLess last December. The company won't comment, but it doesn't appear that Thrifty PayLess' financial performance was wanting while they were there. McAlear led PayLess Drug Stores Northwest Inc. through its December, 1993, merger with Thrifty Corp. after PayLess was spun off by Kmart Corp. On the day the board announced his departure, the company reported earnings before accounting changes of $106 million on sales of $3.1 billion for the year ended Oct. 2.

That apparently was enough to qualify McAlear for a $248,772 bonus tied to profits: McAlear has sued PayLess for the bonus and damages for what he says was an unfair dismissal. Lori Nelson is also suing the company for a bonus of about $55,000 she says is due her.

Both McAlear and Lori Nelson filed for divorce from their spouses last March. But they vigorously deny that David Nelson has any grounds for a suit. "The whole thing is a fairy tale," insists McAlear. "They say there is nothing more dangerous than a woman scorned, but I guess a man's scorn can be worse."

Lori Nelson says her husband simply resented her quick rise: "When I decided to divorce him, David said: `I will make your life a living hell."' David Nelson declined to be interviewed, but his attorney, Gerard Mantese of Huntington Woods, Mich., says he is confident of winning the suit. "My client is on the side of the angels," says Mantese.

This story began at Northern Michigan University, where the Nelsons, business students, met. They married in 1989 and David got a job selling golf carts for Club Car Inc. Lori joined ad agency J. Walter Thompson USA Inc.'s Detroit office as an account executive.

In 1991, she was assigned to the advertising account of PayLess, where she began to work closely with McAlear, then president and based in Oregon. Lori soon was promoted to vice-president at Thompson and in mid-1993 was offered the job of marketing vice-president at PayLess. "She was a star, rising very fast," says Samuel H. Pettway, a SpencerStuart headhunter.

From there on, the story gets murkier. David Nelson alleges that McAlear arranged for Lori to receive a compensation package of more than $300,000 a year, almost six times her income at J. Walter Thompson. McAlear says it was "about half that amount" and contends the package was standard for an executive of Lori Nelson's caliber.

Nelson, then making $70,000 in salary and commissions as a territory manager for Club Car, says he was flown first-class to Oregon to meet with McAlear. Over lunch and dinner, McAlear told him his wife would receive stock worth up to $4 million, Nelson alleges in the suit he filed in Oakland County Circuit Court in Michigan. Given the benefits to his wife, Nelson decided to transfer to a less-lucrative sales region in Oregon, he says, where his income fell to $40,000 last year.

Meantime, Kmart sold PayLess to Thrifty within months after Lori Nelson joined the company. McAlear, who began as a management trainee with Kmart in 1963, emerged as CEO of the newly combined company, which projects sales of $4.6 billion this year from its 1,100 drugstores. And in April, 1994, Lori Nelson was promoted to senior vice-president.

What David Nelson didn't know when Lori was first offered the job, he says in the suit, was that by Aug. 1, 1992, his wife was having an affair with McAlear, then married to his second wife. He says he only discovered the affair in March, after Lori filed for divorce.

Lori Nelson tells a different story. She says her marriage had long been troubled. "[David] is insecure and paranoid," she contends. "He has accused me of being involved with every superior I ever had." They had been separated for a year before he decided to move to Oregon with her. Once there, she charges, David "sat around and didn't go to work."

The only thing missing, it seems, is Hollywood. Mercifully, the parties involved all say they have yet to be contacted about a movie deal.

A TALE WORTHY 0F MELROSE PLACE

JUNE 1993 Lori Young Nelson joins Thrifty PayLess as vice-president for marketing

DECEMBER 1994 Thrifty PayLess ousts both CEO Timothy McAlear and

Nelson

MARCH 1995 Both McAlear and Nelson file for divorce from their spouses

AUGUST 1995 Nelson's husband sues McAlear, alleging the CEO had a "secret and sexual relationship" with Nelson's wife